The much-vaunted threat to traditional wealth management from so-called "robo-advisors" is considered in a new report that also highlights what are seen as outstanding fintech offerings.

The robo-advisors continue their march, at least according to a new study of trends in wealth management.

Wealth managers’ traditional model of providing financial advice is under attack by computer software with increasingly cognitive abilities, taking over tasks ranging from risk assessment and portfolio allocation to financial planning and tax optimisation. But wealth managers can fend off these threats by applying the right technology themselves, according to a study by MyPrivateBanking Research, the Switzerland-based group.

And businesses can even gain a competitive advantage by mixing digital and mobile tools with human advice, the firm said. It looked at the future trends and digital solutions for financial advisors offered by 15 software vendors in the fields of mobile apps, visual communication, and analytical and social media solutions.

“Traditional wealth managers cannot defend their business model against robo-advisors and other digital do-it-yourself tools by merely pointing out that their advisors offer a ‘human touch’ and specific banking know-how,” Steffen Binder, research director of MyPrivateBanking, said in the report. “They need to reinvent their business model from the ground up in order to arrive in the 21st century. At the core of this change is the relationship between the client and the human advisor,” he said.

A buzzword that has become more familiar in recent months, the issue of how technological innovations are a potential threat to traditional, labour-intensive wealth management has already seen a number of reports. With regulation and other cost pressures continuing, such “robo” channels are seen as a potential solution, although there are doubters (see here). Separately, a number of major banks have made a feature of their digital and tech-driven offerings as key strategic themes, such as at DBS, the Singapore-headquartered bank, for example.

The MyPrivateBanking Research study said the following four technology solutions are critical ingredients in the much needed change at the interface between advisors and clients: mobile apps to facilitate and enrich client meetings, video tools to enable sophisticated communication without personal presence, analytical and recommendation tools to increase insights and choice for clients, and digital solutions to control and leverage social media.

Mobile
Mobile apps to support financial advisors are by far the dominating technology tool, the report said, and the study identified several major trends that are relevant in the mobile space, among them the following:

-- There is a growing tendency to provide mobile apps based on SaaS (software as a service) solutions and to use modular approaches to offer a customisable menu of features;

-- Biometrical authentication is entering the market of mobile apps for financial advisors. Advanced authentication features like the Apple Touch ID are gaining substantial ground;  

-- Social media integration is becoming standard. Almost two-thirds of the vendors featured in this report are integrating social media into their solutions;

-- Technology vendors are responding to the needs of client matching solutions. Contributing to an increasing demand for client-engaging tools that empower them to take care of their own finances, there is almost no mobile app for financial advisors without a client sibling;

-- Video conferencing tools are hot. Already, several leading private banks and wealth managers are integrating video chat into their existing mobile interfaces.

“In the last three years we have seen a significant increase in the number of vendors in the advisor app space, and the features and functions in their mobile products are also on the rise,” Binder said. “Still, less than 15 per cent of advisors today are using a proper and professional advisor app provided by their firm, however we predict that within five years the majority will be doing so.”

The report said the space for mobile app solutions is to a large extent covered by established vendors but its analysis found that in the other areas evaluated in this report, financial technology start-ups play a much bigger role. These relatively young vendors provide solutions for wealth managers that offer a host of new communication and analytical capabilities, lifting client service to new levels, such as video communications, natural language software solutions and social media management channels.

Leaders
Based on its analysis, the study gave six vendor solutions the award of “Leading Vendor – Digital Solutions for Financial Advisors 2015”. They were Avaloq Wealth Advisory; eMoney Advisor emX; Hearsay Social; Intellect FABX; MicroStrategy Wealth Management Solutions; Yseop.  

Vendor offerings of mobile apps for financial advisors are analysed for the presence of 45 functions grouped in nine categories, such as CRM, onboarding, financial planning, portfolio management, reporting and client communication. Digital communications solutions for financial advisors are evaluated against 15 criteria each and social media solutions along eight headline functions. The report is based on in-depth interviews with twelve of the vendors covered, supported by a thorough verification process. In addition, representatives of 10 major wealth managers worldwide were interviewed on this topic.